How could I be offended by such a helpful and well thought out post? Your response addresses so many of the questions I posed, I don’t know what I would have done withoput uyour assistance. I made my post trying to initiate an intelligent discussion that might shed light on areas that I am not 100% versed in.
I know at face value, I have a deal that most investors would jump at. I am trying to play devils advocate to make sure there isn’t anything that I am overlooking. I know that most of the appraisal is based on the CAP rate, comps and gross rent multipliers. I just wanted to make sure that I was not missing a major component. I do not know what I do not know.
First Muti Unit What Do I need to Know - Posted by Steve (DC)
Posted by Steve (DC) on November 17, 2005 at 07:33:37:
I am trying to buy a 16 unit building at an auction or before the auction. I was told I could get it before auction for $1.5 mi which would resut in a 12% cap rate. I have access to $400K cash through a heloc for the downpayment, therefore this woud be no money down.
This woud be our first time in multi units and I am trying to find out what the pitfalls are, how the property will be appraised and what the basic differences are between single family and multi units.
Any help would be appreciated as the property goes to auction tomorrow.
Posted by Tim (CT) on November 17, 2005 at 15:28:02:
… you have no business buying a 16 unit multi-plex without knowing the answers to your questions. Do yourself a favor… get educated on this topic before you sink $400,000 into a project you know nothing about. There are lot of different websites on the internet that discuss landlording, fair market rentals, appraisals, etc. Also, James, had a good point… find out the reason it’s for sale.
Re: First Muti Unit What Do I need to Know - Posted by James Harris
Posted by James Harris on November 17, 2005 at 09:37:51:
Steve, Perhaps one of the first questions i would ask if for what reason is this property in foreclosure? How many units are rented? What are the rents? How much work is needed to be done to it? This property will be appraised using market rents of the area, in a nutshell. A far as an appraisal goes, a differecnce could be the fact that a single family residence would more likely be someone’s personal residence; multi-family might be regarded as an investment property, always.